Question 1

A profit-maximizing firm will continue to expand output

Accepted Answer

A)  as long as the revenues from the production and sale of an additional unit exceeds the average costs of the unit. 
B)  until the average cost of producing the good or service is at a minimum. 
C)  as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit. 
D)  until the marginal cost of producing a good or service is at a minimum. 
A)  as long as the revenues from the production and sale of an additional unit exceeds the average costs of the unit. 
B)  until the average cost of producing the good or service is at a minimum. 
C)  as long as the revenues from the production and sale of an additional unit exceeds the marginal cost of the unit. 
D)  until the marginal cost of producing a good or service is at a minimum.

Question 2

If a price taker in a competitive market is going to maximize profits, he must

Accepted Answer

A)  increase the price of his product. 
B)  minimize his fixed costs of production. 
C)  minimize the per-unit cost of producing the good. 
D)  use the highest valued set of resources to produce his product. 
A)  increase the price of his product. 
B)  minimize his fixed costs of production. 
C)  minimize the per-unit cost of producing the good. 
D)  use the highest valued set of resources to produce his product.

Question 3

The experience of the Teamsters in the late 1970s and early 1980s suggests that

Accepted Answer

A)  there are few restraints on the ability of a strong union to increase the wages of its members. 
B)  product market competition with goods made from (or services provided by) nonunion labor significantly limits the ability of a union to get increased wages for its members. 
C)  higher wages tend to stimulate aggregate demand, which makes it easier for a union to gain still higher wages. 
D)  wages are established by the relative skill of union and management negotiators, independent of market conditions. 
A)  there are few restraints on the ability of a strong union to increase the wages of its members. 
B)  product market competition with goods made from (or services provided by) nonunion labor significantly limits the ability of a union to get increased wages for its members. 
C)  higher wages tend to stimulate aggregate demand, which makes it easier for a union to gain still higher wages. 
D)  wages are established by the relative skill of union and management negotiators, independent of market conditions.

Question 4

In a competitive price taker market, a firm's short-run supply curve is its

Accepted Answer

A)  average total cost curve above its average variable cost curve. 
B)  marginal cost curve above its average variable cost curve. 
C)  marginal cost curve above its average fixed cost curve. 
D)  entire marginal cost curve. 
A)  average total cost curve above its average variable cost curve. 
B)  marginal cost curve above its average variable cost curve. 
C)  marginal cost curve above its average fixed cost curve. 
D)  entire marginal cost curve.

Question 5

Use the figure to answer the following question(s).
Figure 9-8  
-The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
A)  10 
B)  15 
C)  20 
D)  25

Question 6

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

Accepted Answer

A)  Nothing, because each firm is already maximizing its profits. 
B)  Many firms will enter the market and each firm will eventually operate at a loss. 
C)  Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business. 
D)  Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease. 
A)  Nothing, because each firm is already maximizing its profits. 
B)  Many firms will enter the market and each firm will eventually operate at a loss. 
C)  Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business. 
D)  Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease.

Question 7

The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

Accepted Answer

A)  each firm's output. 
B)  the number of firms. 
C)  each firm's profit. 
D)  each firm's average cost. 
A)  each firm's output. 
B)  the number of firms. 
C)  each firm's profit. 
D)  each firm's average cost.

Question 8

Competitive price-taker markets are characterized by

Accepted Answer

A)  firms that all produce the same product. 
B)  a small number of firms in the market. 
C)  firms that are large relative to the size of the market. 
D)  widespread use of advertising as a competitive weapon. 
A)  firms that all produce the same product. 
B)  a small number of firms in the market. 
C)  firms that are large relative to the size of the market. 
D)  widespread use of advertising as a competitive weapon.

Question 9

Measured as a share of the labor force, union membership was at its highest level in the United States during the

Accepted Answer

A)  1930s. 
B)  1950s. 
C)  1970s. 
D)  1990s. 
A)  1930s. 
B)  1950s. 
C)  1970s. 
D)  1990s.

Question 10

Use the figure to answer the following question(s).
Figure 9-9  
-The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-9. If the current market price of the firm's product is $50, what output should this firm produce per day?

Accepted Answer

A)  10 
B)  15 
C)  20 
D)  25 
A)  10 
B)  15 
C)  20 
D)  25

Question 11

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

Accepted Answer

A)  false; unions tend to be stronger when they concentrate on only a few producers in an industry. 
B)  false; the demand for unionized workers will be more inelastic if only a few firms in the industry are unionized. 
C)  false; all unions can increase the wages of their members. 
D)  essentially correct. 
A)  false; unions tend to be stronger when they concentrate on only a few producers in an industry. 
B)  false; the demand for unionized workers will be more inelastic if only a few firms in the industry are unionized. 
C)  false; all unions can increase the wages of their members. 
D)  essentially correct.

Question 12

If the model of price-taking firms is so unrealistic and restrictive, why study it?

Accepted Answer

It may be somewhat unrealistic, but it d

Question 13

In a price-taker market, the short-run market supply curve is the

Accepted Answer

A)  vertical sum of the marginal cost curves of all firms in the market. 
B)  vertical sum of the average variable cost curves of all firms. 
C)  horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D)  horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price. 
A)  vertical sum of the marginal cost curves of all firms in the market. 
B)  vertical sum of the average variable cost curves of all firms. 
C)  horizontal sum of the marginal cost curves of all firms so long as price exceeds average variable cost. 
D)  horizontal sum of the average total cost curves of all the firms in the market so long as average total cost exceeds the market price.

Question 14

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

Accepted Answer

A)  The short-run average total costs of firms that are price takers will be constant. 
B)  If a price taker increased its price, consumers would buy from other suppliers. 
C)  Firms in a price-taker market will have to advertise in order to increase sales. 
D)  There are no good substitutes for the product supplied by a firm that is a price taker. 
A)  The short-run average total costs of firms that are price takers will be constant. 
B)  If a price taker increased its price, consumers would buy from other suppliers. 
C)  Firms in a price-taker market will have to advertise in order to increase sales. 
D)  There are no good substitutes for the product supplied by a firm that is a price taker.

Question 15

A local business sells its product for $40 each in a competitive price-taker market. At its present rate of output, its marginal cost is $40, average variable cost is $45, and average total cost is $60. The business should

Accepted Answer

A)  increase output 
B)  reduce output but not to zero 
C)  maintain the present rate of output 
D)  shut down 
E)  raise the price 
A)  increase output 
B)  reduce output but not to zero 
C)  maintain the present rate of output 
D)  shut down 
E)  raise the price

Question 16

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

Accepted Answer

A)  opportunity cost 
B)  earnings of employees 
C)  economic profit 
D)  interest earnings of corporate bondholders 
A)  opportunity cost 
B)  earnings of employees 
C)  economic profit 
D)  interest earnings of corporate bondholders

Question 17

When the demand for a product falls, why do costs of production go down in an increasing cost industry?

Accepted Answer

When the demand falls, surplus resources

Question 18

In a constant-cost industry, an increase in output that increases the demand for resources used by the industry

Accepted Answer

A)  is likely to result in higher prices for at least some resources. 
B)  causes the firm's cost curves to shift downward. 
C)  causes the demand curve for the industry to rise. 
D)  is not likely to result in higher prices for resources. 
A)  is likely to result in higher prices for at least some resources. 
B)  causes the firm's cost curves to shift downward. 
C)  causes the demand curve for the industry to rise. 
D)  is not likely to result in higher prices for resources.

Question 19

Use the table of expected cost and revenue data for the Tuckers Tomato Farm below to answer the following question(s). The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a competitive price-taker market.
Table 9-1
  
-Refer to Table 9-1. If the market price of tomatoes rose to $570 per ton, how many tons per month would the Tuckers produce if they were maximizing profit?

Accepted Answer

A)  6 
B)  7 
C)  8 
D)  9 
A)  6 
B)  7 
C)  8 
D)  9

Question 20

The competitive market process tends to promote economic prosperity because it

Accepted Answer

A)  keeps the prices of goods higher than their production costs. 
B)  creates inefficiencies, which causes people to economize. 
C)  directs self-interested action toward the production of goods that are highly valued relative to their cost. 
D)  sends signals to the government about which goods to produce. 
A)  keeps the prices of goods higher than their production costs. 
B)  creates inefficiencies, which causes people to economize. 
C)  directs self-interested action toward the production of goods that are highly valued relative to their cost. 
D)  sends signals to the government about which goods to produce.

A profit-maximizing firm will continue to expand output

If a price taker in a competitive market is going to maximize profits, he must

The experience of the Teamsters in the late 1970s and early 1980s suggests that

In a competitive price taker market, a firm's short-run supply curve is its

Use the figure to answer the following question(s). Figure 9-8 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

Competitive price-taker markets are characterized by

Measured as a share of the labor force, union membership was at its highest level in the United States during the

Use the figure to answer the following question(s). Figure 9-9 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-9. If the current market price of the firm's product is $50, what output should this firm produce per day?

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

If the model of price-taking firms is so unrealistic and restrictive, why study it?

In a price-taker market, the short-run market supply curve is the

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

A local business sells its product for $40 each in a competitive price-taker market. At its present rate of output, its marginal cost is $40, average variable cost is $45, and average total cost is $60. The business should

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

When the demand for a product falls, why do costs of production go down in an increasing cost industry?

In a constant-cost industry, an increase in output that increases the demand for resources used by the industry

The competitive market process tends to promote economic prosperity because it

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

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Exam 9: Price Takers and the Competitive Process

A profit-maximizing firm will continue to expand output

If a price taker in a competitive market is going to maximize profits, he must

The experience of the Teamsters in the late 1970s and early 1980s suggests that

In a competitive price taker market, a firm's short-run supply curve is its

Use the figure to answer the following question(s). Figure 9-8 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-8. If the current market price of the firm's product is $3, what output should this firm produce per day?

There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?

The market for a competitive price-taker market clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

Competitive price-taker markets are characterized by

Measured as a share of the labor force, union membership was at its highest level in the United States during the

Use the figure to answer the following question(s). Figure 9-9 -The average total cost (ATC) and marginal costs (MC) of a firm producing in a price-taker industry are depicted in Figure 9-9. If the current market price of the firm's product is $50, what output should this firm produce per day?

"If a union is only able to organize a few of the firms in an industry, it is unlikely that the union can substantially increase the wages of its members." This statement is

If the model of price-taking firms is so unrealistic and restrictive, why study it?

In a price-taker market, the short-run market supply curve is the

Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market?

A local business sells its product for $40 each in a competitive price-taker market. At its present rate of output, its marginal cost is $40, average variable cost is $45, and average total cost is $60. The business should

Which of the following is a residual reward that accrues to business decision makers who use resources so as to increase their value?

When the demand for a product falls, why do costs of production go down in an increasing cost industry?

In a constant-cost industry, an increase in output that increases the demand for resources used by the industry

The competitive market process tends to promote economic prosperity because it

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters